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Old 03-27-2002, 06:37 PM
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Default What a Wild Ride!



What a wild ride!


Iím not going to talk about the $1100 I lost yesterday making every mistake in the bookóand I mean EVERY mistake possible. Look up whipsaw in the dictionary and there will be a picture of me with a rope around my neck.


Today was different and in some ways the same, so Iíll relate the nightmare with a happy ending. I did some things right today and some things wrong, but man, am I ever learning fast.


I sold 1 contract (S&P E-Mini) pre-market, and when the market opened I added two more. The market then proceeded to shoot up to + 90 on the Dow and I was down over $1100, but I held on. I felt we would give back, but I never dreamed I would get out almost even! The market came back 9 handles, and I got out of my position 2 ticks off of the low. At that point I was down about $150 for the day. Nice comeback. I should have double reversed, but after the minis went up one point I realized we would probably go up and test +90 on the Dow again, so I went long 1 lot and then added another 3 ticks later. The market then went up 5 handles, and I got out 1 tick off of the high when the Dow hit +85; I said thatís close enough and liquidated. I ended up making $325 for the day when at one point I was down $1100; $1400 swing! I donít want to go through that again. It looks like I got out of my long trade just in time. The trading got real choppy in the last half hour. I sold the minis at 1148.25 and they went from there in the last hour down to 1143. They closed at 1146.25, and the Dow ended up + 73. Wow, what a ride.


Some observations: I sweat every tick. When the markets run either up or down they run pretty fast. I did notice that when the bias was up the minis had trouble going down too much even when the market was selling offóand vice versa. Things get real quiet around lunchtimeó10:00 to 11:00 Pacific. The open and the close is where most of the action is. News can really move the marketsóshort term. Itís almost like the locals are expecting the news that is coming, good or bad, and trade ahead of everyone elseóthen they fade the move. It takes balls, but thatís how it looks to me.


Now, what I did right. I only made two trades! My commissions were $24.00. This is a far cry from the $197.00 and $150.00 in commissions the first two days. Ten total contracts for the day. I was more patient with my losing positions and my winning positions. I didnít panic. I was cool under pressure, and the pressure was very high.


Now, for the errors. God this is painful. I didnít cover my losing short position when the market started to run against me early in the morning. This is a cardinal sin. I let things get too far out of hand. But once I got buried I decided to let things go and just see what was going to happen. If I take a bad loss then I take a bad loss, but Iím going to do things a little differently today. Yesterday I panicked all over the place and was in and out so many times I didnít have a chance to win a dime. Every time I made a trade yesterday the market would immediately go against me at least 3 ticks. I canít see the market depth and that might be a big disadvantage. I can also see where being on the floor and watching who is doing the buying and selling (and how much) would also be some important information. I couldnít do anything right yesterday. Not to mention the fact I was completely off of my game. Today, I decided to hold onto my trades a little longer and not lose my cool. Well, I held onto my original trade too long, and it worked out, but that doesnít mean I did the right thingóIíll just have to learn from that.


Tomorrow is the last day of the week and this weekend Iíll evaluate my experiences to see if I want to continue on with this venture. Right now Iím torn. The pressure is intense and you canít blink for a second. Oh yeah, I made two major errors today and yesterday. I traded in front of news on both days. I got caught short yesterday in front of the consumer confidence report and watched the minis gap up 4 full points on me! I was going to get out before the news and then make a trade but CNBC went to commercial and when they came back it was too late. My fault, not the televisionís. Iíll never trade in front of news again. Housing sales today were slightly less than expected but still positive and the market must have liked that because it gave things a little bounce.


One last mistake: yesterday, I was long one contract pre-market. The market was chopping around and I put in a limit order to cover + 3 ticks. Then I decided to just let it go and see if I could catch a nice up swingóbut I forgot to cancel the order! Well, naturally I get hit and proceed to watch the market take off in what would have been my favor 11 full handles! I was on tilt to say the least and tried to trade all around that rally and subsequent decline. I donít think I had one winning trade. Your emotions can really get in the way sometimes.


For those of you thinking about trying the E-Minis I would make these suggestions. Just trade one contract for at least 1 month! Get a feel for what is going on. Set a predetermined loss on your trade, either points or dollars. Iím reluctant to set a limit on my wins but I donít think that would hurt while learning. LBJ (Lewis Borsellinoóhis book The Day Trader is very good) says to go for the 2 to 1 ratio. If your willing to lose $200 on a trade then try to win $400 on your winners. That way you can lose 60% of your trades and still make money. Itís good common sense. Focus. Do your homework. Have some kind of charting system, and know where support and resistance are. One of the reasons I didnít panic today was because I was able to look farther out at the ten and fifteen minute charts and see that we were approaching serious resistance at the top of the move and strong support at the bottom. Just looking at the one-minute chart youíd think the sky was falling. (In fact, the minis went one tick over the high point on the ten minute chart and that was the top. Yesterday I would have panicked and got out--or worse--reversed!) Let your winners run as long as you can stand it--and then let them run a little bit more.


Anyway, its been quite a ride. I can see where it would take at least a year to get in front of the learning curveóif thatís even possible. No wonder so many people blow themselves up trading. Iíve lived it in three short days! My net loss after three days . . . -$600. This will be my last post about my adventures and misadventures trading futures. Hope you enjoyed. Good luck to all.


All comments welcome.


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